Backers launch income-tax initiative

Proponents of a state income tax set the stage for a knock-down political fight Wednesday, kicking off a campaign for an initiative that would target earnings of the state's wealthiest citizens and roll back taxes on property and small-business revenues.

The point man for Initiative 1077 is Bill Gates Sr., father of Microsoft co-founder Bill Gates and chairman of a state panel that in 2002 called for an income tax but whose recommendation fell on deaf ears.

If the measure qualifies for the ballot — as both sides predicted it would — and then wins a November vote, supporters say it would raise $1 billion a year for education and health care.

The wealthiest 3 percent of state residents, individuals earning more than $200,000 and couples earning more than $400,000, would be subject to the tax, proponents said.

"It will cut taxes for the vast majority of Washington citizens," Gates said. He was the first person to sign an I-1077 petition at a news conference at Soho Coffee in Seattle's Central Area.

"Our tax code is unfair," Gates said. "It harms our economy and fails to provide the stable revenue we need for important state services, particularly priorities like education and health care."

Gates said lower- and middle-income families pay too much tax and the wealthy too little. The business and occupation tax on gross receipts, he said, "penalizes small businesses, the engines of job growth in our state."

The typical King County homeowner, benefiting from the initiative's 20 percent rollback in the state share of property tax, would receive a tax reduction of about $160, and 375,000 businesses would be exempt from business and occupation taxes, supporters estimate.

Opponents were quick to blast the initiative. "Once again we're talking about raising taxes in the middle of a recession, job-killing taxes that are the worst thing we could have now," state Republican Party Chairman Luke Esser said.

"I'm not surprised. The appetite for more taxes and more government is insatiable," Esser said. "The week after the Legislature raised taxes by $800 million, the left is saying that's not enough, we've got to raise new income taxes as well."

The Yes on 1077 campaign must collect 241,153 valid signatures by July 2 to qualify for the ballot. The campaign hasn't yet posted a list of supporters, but consultant Sandeep Kaushik predicted "a broad coalition" will emerge in the coming weeks. The representative assembly of the Washington Education Association (WEA) will vote next month on whether to support the initiative.

WEA President Mary Lindquist said the tax proposal is "a welcome step" that would restore $700 million in education spending that was cut by the Legislature. Another powerful union, the Service Employees International Union, is also expected to help fund the I-1077 campaign.

Washington is one of seven states that don't collect personal income tax. Others are Alaska, Florida, Nevada, South Dakota, Texas and Wyoming. New Hampshire and Tennessee tax interest and dividends, but not wages.

Washington voters approved an income tax in 1932, but the state Supreme Court ruled it unconstitutional the following year. Gates, an attorney, said he believes the court would now find an income tax constitutional because the earlier decision was based on precedents, since overturned, that defined income as property.

I-1077 proponents said they have no intention of imposing an income tax on individual taxpayers whose incomes are below $200,000. The initiative would require a vote of the people to extend income tax to people with lower incomes.

Gates acknowledged the Legislature has the authority to modify or repeal initiatives after two years and has done so many times. But he said he would be "astonished" if lawmakers unilaterally expanded the scope of an income tax.

"I just don't believe that," said Paul Guppy, research director of the conservative Washington Policy Center. "Every other tax — and I could cite many examples — has started out with a low rate and then gone up from there. The federal income tax started out at 1 percent."

No union representatives appeared alongside Gates. The event did include speakers representing small businesses, health-care providers and the League of Education Voters. League board member Ruth Lipscomb said income-tax revenues would "start rebuilding our state's public-education system."

Mary McNaughton, a nurse who spoke at the event, welcomed the prospect of additional funding for health care. On Monday, she said, a patient who is unemployed and without health insurance was released with a lingering case of MRSA but no oral antibiotics from the hospital where McNaughton works.

McNaughton said she didn't know if the patient will be able to pay for her prescription out of pocket or if she will be "walking around with an infection that's a threat to the community."

Gates said he was optimistic about the initiative's prospects at the polls. "There will be big union contributions and I think there will be some immense individual contributions — people who want to change things," he said.

Asked if his son was on board with the tax initiative, Gates said they hadn't discussed it. "I don't know what my son is going to do."

Anti-tax activist Tim Eyman, who attended the news conference, declined to predict how a November vote would turn out. "It's so hard because we've never seen a campaign with such an unlimited supply of money," he said. "They can spend as much as they want. ... The opponents will be hopelessly, hopelessly outspent."

News researcher Gene Balk contributed to this report. Keith Ervin: 206-464-2105 or kervin@seattletimes.com